Apple, Always the Elephant in the Mobile Payments Room

As Blackberry and Samsung have enabled NFC on all of their new handsets sold in Canada, Apple has conspicuously refused to join the growing mobile payments market.

U.S. payments players keep wondering when Apple will make a move in mobile payments as it releases new versions of the iPhone without any NFC capability. Many think that if Apple does make a move to enable payments on its mobile devices that it will push the market towards faster adoption as the legions of Apple fans take up the ability to pay with their phones.

Here in Canada those involved in mobile payments are also scratching their heads over Apple’s plans. But for a very different reason. NFC seems to be moving ahead full speed in Canada, with high NFC penetration (in comparison to the U.S.) among point of sale terminals (31%) and mobile handsets (15%). And that NFC penetration is increasing rapidly, particularly among mobile devices as almost all new phones being issued by the major carriers here are NFC enabled, except for the iPhone.

Blackberry (yes, it is still popular here in Canada) and Samsung have worked with some of the mobile payments players here in Canada such as CIBC and built NFC into their newest devices, Apple lags behind. And it could be a serious drag for the mobile payments market here going forward; the iPhone makes up 35% of the smartphone market.

Some are looking for a solution to this issue: CIBC says that it is working with partners on developing a sleeve that is NFC-enabled that would fit around the iPhone. SecureKey, an online and mobile security company, is developing a QR code point of sale solution that would allow iPhone users to make mobile payments. But a QR code solution doesn’t have the same convenience as a tap-and-go NFC payment, which would give iPhone users a lesser customer experience.

But nobody seems to know how Apple plans to approach the issue. It’s conceivable that if Apple stands pat it could lose market share in Canada to Android, as all new Samsung models being sold here are NFC equipped. Faced with that prospect, would Apple finally consider moving into NFC with the iPhone to keep its market share in Canada? And what kind of boost, if any, could that give to mobile payments here in the U.S. if Apple starts selling NFC-enabled iPhones across the border? It would seem that at some point Apple is going to have to play along with the NFC market here, but until then there will be much more head scratching.

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio

Totally. Apple rarely does anything half-@##ed. When they do, the bloggers rip them apart. I agree. I'd love to be a fly on the wall at Apple HQ when they debate if and how the next version of the iPhone will do payments. Yep, I'm a #financialtechgeek

I don't think that Apple will make a move in mobile payments until they figure out a way that to make a mobile payment that si way more convenient and simply a better user experience than anything that is on offer right now. It's just my opinion, but until they can do something that would be the equivalent of "reinventing" the entire way we think about payments -- like they reinvented the way we think about phones or music players -- they'll stay out of this business.

Yeah I don't see the necessary investment in NFC terminals being made here, although some of the terminal vendors have said that they are selling new terminals with both EMV and NFC technology so merchants can take both those of those payments types with one upgrade. But it will take a long time for that change to reach critical mass. Google and other wallet solutions are not going to wait around for NFC terminalization to reach that critical mass.

Apple has been trailing Android for a while now in overall market share. The only difference is there are a ton of different Android devices all built by different manufacturers, resulting in some fragmentation in capabilities and specifications. The iPhone is still the market share leader for any single device. If the iPhone was able to do mobile payments (in a smart way, that makes sense for Apple, retailers, banks and comsumers), it would probably set the standard.

We met with the head of emerging technologies at Rogers, one of the three major Canadian telcos. He said that when Rogers originally talked to different banks about working with them on mobile payments, Rogers asked for a piece of the interchange fees. The banks wanted no part of it. So, working with CIBC, Rogers came up with a different pricing model where they rent space on their network for issuers to securely store their credentials. But Rogers still wants in on the interchange business, which is why they recently got licensed as a bank and started issuing their own credit cards that they can collect interchange on. Just one example of the turf battles you're talking about Kathy.

The link I put in the story above has some different #'s Greg. Apparently Android has really taken off in Canada in the last couple of years, and, according to comScore's study earlier this year, now has the biggest share of the market at 40%. iOS has 35%, and has been declining in the face of Android's rise. So Apple's position in the market is already falling right now, regardless of what they do in mobile payments. Not getting involved in mobile payments could make them fall faster.

I agree with Kathy about the risk of fragmentation among different mobile payment methods. There are so many competing methods - NFC chips. software based, card readers... And don't forget PayPal, another mobile payment method. Yet Apple has the potential to shift the market to whatever it chooses given its clout. But as Greg points out, Google Wallet is playing in Android and iOS camps.

My takeaway from this very interesting analysis is that the evolution of m-payments/wallets continues to be more about turf battles than customer interests & needs. It has elements of the VCR system battles of the 80s, with BlackBerry standing in for Sony Betamax (good system but not going to make it) & manufacturers pursuing incompatible systems & all about last man standing. Are we going to see multiple incompatible mobile payments systems/platforms driven by the interests & market share goals of different platform players?